Alphabet Inc. solidified its position as a top performer within the S&P 500 during the fourth quarter of 2025, with its shares climbing approximately 30% in that period alone to trade near record highs. This remarkable advance is largely attributed to the market’s growing excitement around the company’s proprietary Tensor Processing Unit (TPU) chips. Financial analysts now ascribe a potential valuation of up to $900 billion to this semiconductor division, a scale that could fundamentally reshape the conglomerate’s business model.
Robust Quarterly Performance Provides Foundation
The company’s operational strength was evident in its third-quarter results, which handily surpassed market expectations. Alphabet reported earnings per share of $2.87, a full $0.58 above consensus estimates. Revenue reached $102.35 billion, compared to forecasts of $99.90 billion.
Key segments showed exceptional vigor. Google Cloud revenue expanded by 34% year-over-year, while its operating margin improved significantly from 17.1% to 23.7%. The cloud division’s remaining performance obligation stands at roughly $155 billion. The company maintains robust profitability metrics, with a return on equity of 35% and a net margin of 32.2%.
Wall Street Revises Targets Upward
The bullish outlook is reflected in analyst sentiment. Currently, 41 market experts rate the stock as a “Buy,” with an additional seven issuing “Strong Buy” recommendations. The average price target sits at $312.
Several firms have recently increased their targets:
* KeyCorp raised its objective from $265 to $300.
* Scotiabank set a target of $336.
* HSBC reaffirmed a Buy rating with a $335 target.
* Oppenheimer lifted its target from $270 to $300.
Despite trading at a price-to-earnings ratio of about 31—its highest level since 2021—the valuation is considered moderate relative to peers like Apple and Microsoft, supported by dynamic growth in cloud and artificial intelligence services.
The Strategic Power of TPU Chips
Analysts point to the TPU business as a potential game-changer for future valuation. DA Davidson estimates that capturing a 20% share of the AI chip market could see this segment alone valued at $900 billion.
Should investors sell immediately? Or is it worth buying Alphabet?
Several data points underscore the momentum:
* Multi-billion dollar supply agreements are in place with AI firm Anthropic.
* Alphabet is in negotiations with Meta Platforms regarding TPU access.
* Morgan Stanley forecasts 5 million TPU unit sales for 2027, a 67% increase over prior estimates.
* Projections for 2028 anticipate 7 million units, representing 120% growth.
Morgan Stanley provides further context: every half-million TPU chips sold to external data centers could contribute approximately $13 billion in revenue and add $0.40 per share to earnings in 2027.
Gemini 3 and the Integrated Advantage
The launch of the Gemini 3 AI model has provided additional impetus for the stock. The model received uniformly positive reviews and is specifically optimized to run on Alphabet’s in-house TPU chips. This tight integration of proprietary semiconductors, leading AI software, and cloud infrastructure is seen as granting the company a unique competitive edge among technology giants.
Institutional and Insider Activity
Institutional investors hold 40% of Alphabet’s outstanding shares. While Dodge & Cox reduced its stake by 16.8% in the second quarter, it retains a substantial position of 14.18 million shares valued at $2.52 billion. Conversely, Northwestern Mutual Wealth Management increased its holding by 3.7% to 1.16 million shares.
Corporate insiders have used the elevated share price to realize gains. CEO Sundar Pichai sold 32,500 shares in November at $296.64 each. Over the past three months, executives have disposed of a total of 196,406 shares worth $51.74 million.
The stock’s all-time high of $328.67 remains within close reach. Shareholders are set to receive a quarterly dividend of $0.21 per share on December 15. While the yield is a modest 0.3%, the payment underscores the company’s conservative capital return policy.
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